Salary
Effective tax rate
Always lower than the top marginal rate, because only part of the income is taxed at the highest band.
The Formula
effective rate = total tax / gross pay
Always lower than the top marginal rate, because only part of the income is taxed at the highest band.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| r e | Effective rate | ratio | Average rate actually paid across all income. |
| T | Total tax | currency | Combined tax withheld. |
| G | Gross pay | currency | Total pay before deductions. |
What Each Symbol Means
r eratio
Effective rate
Average rate actually paid across all income.
Tcurrency
Total tax
Combined tax withheld.
Gcurrency
Gross pay
Total pay before deductions.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate take home pay page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Take Home Pay, filed under Everyday Life. Every number the guide produces comes from substituting into this one line.